The Systemic, Long-run Relation among Gasoline Demand, Gasoline Price, Income, and Vehicle Ownership in OECD Countries: Evidence from Panel Cointegration and Causality Modeling

This paper analyzes gasoline consumption per capita, income (GDP per capita), gasoline price, and car ownership per capita for a panel of OECD countries by employing panel unit root and cointegration testing, panel Dynamic and Fully Modified OLS estimations, and panel Granger-causality tests. The four variables are determined to be panel I(1) and cointegrated. Estimated long-run and short-run income elasticities are smaller than what typically had been found previously. Lastly, gasoline consumption is Granger-caused by gasoline price, but not by car ownership or income; whereas, car ownership is Granger-caused by income and at the margin by gasoline consumption, but not by gasoline price.